A ballot initiative
imposing a tax on millionaires to fund mental health services did not violate
equal protection, this district’s Court of Appeal ruled yesterday.

Reasoning that taxpayers
earning more than $1 million annually do not comprise a “suspect class”
requiring strict scrutiny analysis, Div. Two rejected a challenge to
Proposition 63 by two La Canada Scientologists.

Proposition 63 was
passed in 2004 and expanded funding for mental health services for all
Californians by imposing an additional tax of 1 percent on annual income
exceeding $1 million. It also prevented future state funding for mental health
services from falling below the amounts allocated in 2003.

The Church of Scientology views psychiatry as
a barbaric and corrupt profession, and encourages alternative care based on
spiritual healing.

Claim for Refund

Craig Jensen—the founder
and chief executive officer of Burbank software company Diskeeper Corporation,
formerly Executive Software International, Inc—and his wife, Sally Jensen,
filed suit after the Franchise Tax Board took no action on their claim for
refund of state tax imposed on the portion of their 2006 annual income
exceeding $1 million.

The pair alleged they
were victims of arbitrary
discrimination in violation of the federal and state equal protection clauses
because Revenue & Tax Code Sec. 17043—which was added by Proposition
63—singled out wealthy individuals to bear the burden of a public expense,
while others were excused. They reasoned that wealth is not a rational basis
for a tax assessed for a specific purpose, such as mental health services.

The Jensens also
challenged Welfare & Institutions Code Sec. 5891, maintaining funding for
mental health services at 2003 levels, as an unconstitutional suspension of the
legislative and executive branches’ budgetary powers. They claimed the
initiative “cast in stone” the budgets for mental health services, and should
have been done through a constitutional amendment.

‘Great Leeway’

The Franchise Tax Board
demurred and Los Angeles Superior Court Judge Rex Heeseman dismissed the suit,
noting that states have great leeway in making classifications that produce
reasonable systems of taxation. Heeseman similarly rejected the argument that a
constitutional amendment was necessary.

On appeal, Presiding
Justice Roger W. Boren agreed, writing that there was “no basis” to hold that
wealthy individuals form a “suspect class” deserving a heightened degree of
scrutiny.

A suspect class is
traditionally denoted by a presumptively unconstitutional distinction between
individuals on the basis of race, national origin, alienage, or religious
affiliation.

“Wealth generally
confers benefits, and does not require the special protections afforded to
suspect classes,” he said.

Applying rational basis
review, Boren said that Proposition 63 was not unconstitutional because an
income tax may be rationally based on a taxpayer’s income level and ability to
pay, and because there is no need to show that a particular taxpayer personally
benefits from a tax assessed for the public good.

The justice also
rejected the Jensens’ contentions that the provision locking in budgets
exceeded the electorate’s right to raise taxes through the initiative process.

Noting that the
Legislature does not have the exclusive power to raise taxes and that courts
have upheld the initiative power against claims that it impairs the
Legislature’s ability to balance the budget, he said that the Jensens had
failed to show that Proposition 63 would “destroy or severely limit” the Legislature’s
power to formulate a budget.

Boren further commented
that the provisions of the initiative were not “cast in stone,” pointing out
that Proposition 63 could be amended or repealed by the Legislature with the
approval of the electorate, and that the Legislature amended Welfare &
Institutions Code Sec. 5891 in 2008 to allow the state controller to use funds
created for loans to the General Fund.

Justices Judith M.
Ashmann-Gerst and Victoria M. Chavez joined Boren in his opinion.